Total Nigeria vs Mobil Oil Nigeria: Neck to neck

Total Nigeria Plc and Mobil Oil Nigeria Plc are the two most capitalised petroleum-marketing companies in Nigeria. Altogether, they accounted for some 52 per cent of total market capitalisation of the downstream oil sector at the stock market. Total Nigeria leads the capitalisation table with 28 per cent while Mobil Oil Nigeria trailed with some 26 per cent. A subsidiary of French multinational and Europe-leading oil company-Total S. A, Total Nigeria is a company of considerable influence and size in Nigeria and globally. With more than 500 retail outlets, five Liquefied Petroleum Gas (LPG) bottling plants, three lubricant blending plants, four aviation depots and many other facilities, Total Nigeria is undoubtedly a leading oil-marketing company.

Mobil Oil is the earliest petroleum-marketing company to be incorporated in Nigeria and has operated for more than six decades in Nigeria. Mobil Oil Nigeria is a subsidiary of Mobil Oil Corporation of the United States of America and it runs a nationwide network of outlets that make the company a household brand throughout Nigeria.

Both companies shared many similarities. With some 60 years of operations in Nigeria, they have etched their brands and stocks as blue chips. Interestingly, both companies were listed same year, same month and within the same week.

Audited reports and accounts of both companies for the year ended December 31, 2011 showed a similar pattern, with recovery in sales characterised with decline in profitability and returns. Where the performance trends differed, the companies intermittently switched roles. While Total Nigeria led in terms of size of growth, Mobil Oil Nigeria made more profit per every unit of sale and its returns were quite higher than its competitor.

Sales generation

Both Total Nigeria and Mobil Oil Nigeria grew the top-lines in 2011 as against general declines in the previous year. Total Nigeria increased sales by 8.3 per cent in 2011 as against a drop of 10.1 per cent in 2010. Mobil grew sales by 6.4 per cent in 2011, a major recovery from the declines in the past two years when sales dropped consecutively by 7.1 per cent and 5.9 per cent in 2009 and 2010 respectively.

Profitability

Mobil’s gross profit grew by 4.2 per cent in 2011 but profit before tax dropped by 3.4 per cent in 2011 as against significant growth of 41 per cent. Net profit after taxes also slipped by 3.4 per cent in 2011 compared with increase of 37 per cent in 2010. Gross profit margin dropped marginally from 16.6 per cent to 16.3 per cent while pre-tax profit margin contracted to 8.9 per cent in 2011 as against 9.8 per cent in 2010.

On the other hand, Total Nigeria’s gross profit grew by 6.6 per cent in 2011 as against a decline of 4.5 per cent in 2010, showing a two-year average growth of 1.05 per cent. The company also replaced its 6.2 per cent decrease in profit before tax in 2010 with a growth of 1.3 per cent. But as margins diminished on item-by-item basis, profit after tax caved in with a decline of 4.0 per cent in 2011 compared with negligible growth of 0.1 per cent in 2010. Underlying profit-making capacity of the company was however, generally weak. Gross profit margin dropped below average to 12.9 per cent as against 13.1 per cent in 2010. Pre-tax profit margin also decreased from 3.6 per cent to 3.4 per cent.

On the average, Mobil still maintained its lead with higher gross margin and pre-tax profit margin. Compared with Total Nigeria’s average gross margin of 13 per cent, Mobil made about 16.5 per cent while Mobil’s average pre-tax profit margin of 9.35 per cent more than doubled Total Nigeria’s 3.5 per cent.

Actual returns

Mobil returned 18 per cent on total assets in 2011 as against 24 per cent posted in 2010 while return on equity slipped from 65 per cent to 55 per cent. Average return on total assets over the past two years stood at 21 per cent while average annual return on equity stood at 60 per cent.

Meanwhile, Total Nigeria’s return on total assets was almost unchanged at 10 per cent while return on equity dropped from 44.5 per cent to 38 per cent. Average annual return to shareholders thus stood at 41.25 per cent.

The bottom-line

Protracted reform in the petroleum sector and continuing controversy that exacerbate global oil variables tend to undermine the potential of Nigerian petroleum companies. These compounded the almost monolithic nature of the business where little product differentiation gives less room for marginal errors. The margin of profitability, and sustainability of such, thus depends on high level of appropriate mix of often-difficult variables.

Both companies obviously need to explore ways to accelerate sales growth and control cost to deliver higher margins and ensure better returns to shareholders. For now, it’s a neck-to-neck contest of the two oil majors.